Foreign investors have cast doubt on public assurances from the Chinese government that carmakers are not required to give up sensitive electric vehicle technology in exchange for access to China’s market.
Under a law introduced on January 7, joint ventures must demonstrate that they have mastered the complete technology for “new energy vehicles” (NEVs) before they receive permission to produce them.
This prompted complaints from foreign investors that the rules violated World Trade Organisation rules against forced transfer of technology.
The law was also featured in a prominent report by the European Union Chamber of Commerce in Beijing. The EU Chamber study, released on March 7, criticised China’s industrial policy as unfairly discriminating against foreign companies. It singled out the new law, which it said would require foreign manufacturers to disclose and transfer critical know-how, such as software codes, to their joint venture partners.
In the past two weeks Chinese officials have appeared to backtrack on some provisions of the law, denying that it requires foreign companies to transfer technology to Chinese joint-venture partners.
Early this month Miao Wei, minister of industry and information technology, said the notion that foreign companies would have to transfer technology was a “misunderstanding”, and that it was “not mandatory for foreign-funded enterprises to transfer technology to China”.
Then last week Sun Jiwen, a spokesman for the commerce ministry, insisted there were no compulsory technology transfer obligations for foreign investors in joint ventures. “Attracting foreign investment is crucial to China’s opening up,” he said. “Therefore, we need to underpin a healthy and regulated market environment.”
However, representatives of foreign industry remain on edge as they wait for changes to the law.
“There is nothing in writing, only talk,” said Jörg Wuttke, head of the European Chamber of Commerce in Beijing. “There is much thunder but we’re still waiting for the rain.”
When Beijing allowed foreign carmakers to set up in China in the early 1980s, they were required to enter joint ventures with local manufacturers in an effort to protect and expand the local industry. Since then, China has surpassed the US to become the world’s biggest car market and a priority for the world’s biggest car companies. It is also the world’s largest market for NEVs.
Foreign carmakers would prefer to import parts that rely on sensitive technology rather than have Chinese suppliers produce them, fearing that sharing technology increases the risk that it will be stolen.
The officials’ statements that such technology transfer would not be required were “comforting”, according to one car industry executive in Beijing.
“Making public statements means it will be hard to back off,” he said, but added that the real test would come in a few months when some foreign hybrid cars were expected to come up for regulatory approval.
“Before we can be comforted that there is no forced localisation we need to have some products get permits to be produced.”
Other overseas experts also remain sceptical.
“It’s not surprising that the Chinese government denies mandatory technology transfer, for governments don’t typically admit to violating WTO rules,” said Jude Blanchette of the Conference Board in Beijing. “Proprietary tech transfers for market share has been a feature of the [Chinese] marketplace for some time.”
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